German cabinet signs off on minimum wage from 2015

New wage will not cover minors, trainees or some interns

04/02/2014|hrreporter.com|Last Updated: 04/02/2014

BERLIN (Reuters) — Germany's cabinet agreed on Wednesday to a national minimum wage of 8.50 euros ($12.92 CAD) per hour — a flagship project for the Social Democrats (SPD) who share power with Angela Merkel's conservatives.

The minimum wage will take effect in Europe's biggest economy from 2015 but will not cover minors, trainees and some interns. Some employers can continue to pay their workers less until the end of 2016 if they are covered by certain collective agreements.

Companies will also be able to pay the long-term unemployed less than the legal minimum wage for the first six months of a new job.

"The minimum wage is coming," SPD Labour Minister Andrea Nahles said at a news conference in Berlin.

"It is, above all, good news for people who work hard but get such low wages that they can't live from them so I hope that with this pay package we will create more wage justice and that's good for cohesion in Germany overall," she added.

The minister has reassured employers in sectors where seasonal work is common, such as agriculture, hotels and restaurants, by offering support to help them adjust to the minimum wage.

The Bundestag lower house of parliament is due to debate the law in June before passing it in July. The Bundesrat upper house is expected to wave it through after the summer break.

Employer lobbies say the plan will cost jobs and introduce too much regulation.

But Nahles said: "We're not expecting any effects, be they positive or negative, on employment at the moment," pointing to Germany's previous experience with 13 sectoral minimum wages and the experience of other countries.

Of the 28 states in the European Union, 21 have minimum wages. EU states without minimum wages tend to have smaller low-wage sectors than Germany and a bigger proportion of their workers are covered by collective wage deals between unions and employers.

"With the general minimum wage we are taking a clear stand against unfair wages," he said.

But Frank Bsirske, head of Verdi trade union, said excluding the long-term unemployed from the minimum wage was discriminatory. German welfare organisation Paritaetische Wohlfahrtsverband said it marked the start of a "two-tier labour market".

Slightly more than a tenth of workers in western Germany earn less than the proposed 8.50 euros an hour, compared with a quarter of workers in eastern Germany, according to data from the IWH institute.